blog | 6 min read

Understanding the Role of Customer Data Platforms in Marketing

February 10, 2023

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In the race to improve data-driven decisions, the Customer Data Platform (CDP) has emerged as a game-changer for marketers looking to improve the customer experience, optimize campaigns, and drive sustainable revenue growth. A CDP is a powerful suit of tools that enables brands to ingest and unify customer data from multiple sources, and then activate it across multiple media channels, providing invaluable insights and enhancing personalization efforts. Let's explore the key aspects of a CDP and its significance for brands' marketing teams.

What is a CDP and what are its common marketing use cases?

A CDP is a centralized platform that consolidates and organizes customer data from various touchpoints, including websites, mobile apps, point-of-sales systems, loyalty platforms, and more. It creates a unified customer profile, stitching together data points to build a holistic view of each individual. With this comprehensive understanding of customers, marketers can deploy fine-tuned strategies to maximize the results on their key objectives.

Common marketing use cases for brands using a CDP include:

1. Audience Segmentation and Targeting

A CDP empowers brands to create highly personalized and relevant marketing campaigns by utilizing audience creation, segmentation and targeting. With a deep understanding of customer preferences, behaviors, and past interactions, brands can deliver targeted messages, offers, and recommendations that resonate with their audience. Such personalized campaigns can have specialized audiences, media bidding, and creative optimization through the application of data from a CDP.

2. Customer journey optimization and personalization

By tracking customer interactions across multiple channels and touchpoints, a CDP allows brands to identify critical moments in the customer journey. This insight helps optimize marketing efforts and ensure a seamless, cohesive experience across all lifecycle stages, from awareness to conversion to retention and loyalty. Real-time use of next best actions can unlock significant value, and by combining this data with conversion rate optimization programs can boost conversion rates, average revenue per customer, and lifetime customer value.

3. Data and insights

CDPs accurately unify and resolve data discrepancies, creating profiles that span across the customer's entire brand relationship. Adapting alongside customers as they evolve, including updates to contact information and preferences, CDPs offer brands a comprehensive 360-degree view of their customers. These insights serve as the foundation for impactful marketing decisions that drive tangible business outcomes.

CDPs are replacing DMPs as the preferred choice for audience management

Data Management Platforms (DMPs) were traditionally used for online audience management, aggregating, and activating anonymous third-party data for real-time targeted online advertising. They were not so great, however, at connecting with offline data, and with evolving privacy regulations, consumer expectations, and the decline of third-party cookies, DMPs are struggling to support marketing efforts. Brands have seen far more success from first-party data and providing a personalized, individual-level engagement with their customers, which DMPs cannot do.

CDPs have risen to the forefront as the natural evolution of audience management. Unlike DMPs, CDPs focus on collecting and organizing first-party data, which is the data directly received from interactions between the brand and their customers. By capturing and analyzing this valuable data, CDPs offer deeper insights and enable marketers to deliver highly personalized experiences, building stronger relationships with their customers.

The growing importance of CDPs for marketers

According to a 2022 eMarketer study, 62% of consumers expect brands to anticipate their needs, up 6% from 2020. However, as brands grow, managing customer records that span multiple channels  has become exponentially more complex. To compound things, leading brands have customer records that go beyond in-store purchases to also include online and partner channel purchases, as well as interactions with loyalty programs, customer services and email.

CDPs excel at managing vast volumes of data and seamlessly integrating with various systems and platforms, establishing a centralized hub for comprehensive data management.  This makes a CDP an indispensable tool for marketers to unify the data and tailor messaging specifically for customers — something that is no longer a nice-to-have, but expected.

Moreover, CDPs integrate with media buying platforms, personalization engines, and reporting systems, offering substantial business value. Notably, CDPs facilitate the creation of segments encompassing a brand's most valuable customers, which can serve as a seed for generating lookalike audiences for marketing initiatives such as Programmatic Ads on demand-side platforms (DSPs), or social  media campaigns on Meta or TikTok. Additionally, the focus on utilizing first-party data goes beyond enhancing accuracy in downstream marketing; it also ensures compliance with new privacy laws and regulations, safeguarding the company's adherence to evolving privacy standards.

The benefits of a choosing the right CDP

For brands, a well-selected CDP brings numerous advantages. Firstly, the right CDP makes good use of both deterministic and probabilistic identity resolution to accurately bring together data and segment audiences, often using machine learning techniquesThis is especially evident when marketers use these audiences in addressable marketing channels like the Google Marketing Platform, social media networks, video and CTV, Retail Media Networks, and Digital Out-Of-Home where accurate profiles mean significantly higher effectiveness. Additionally, a good CDP offers out-of-the-box integrations that map data into the correct schema/format expected by the platform, resulting in a much shorter time to value.. These efficiencies can to improved ROI, increased growth, or media cost savings, depending on how brands choose to leverage this benefit.

Secondly, when CDPs are used for personalization, they enable the orchestration of better customer experiences, leading to improvements in vital business metrics such as conversion rate, revenue per user, and lifetime value.

Finally, the right CDP will provide powerful data and insights that drive robust analysis, further driving up business value and revitalizing confidence in advertising and marketing. Sometimes, CDPs use their years of experience in the market to build useful advanced attributes such as predicted customer lifetime value into the system. The benefits are so significant that for enterprise advertisers, a well-selected and installed CDP offers a true competitive advantage.

Ready for the Future

The world is changing at record pace and few spaces are feeling this as much as advertising and marketing. The pandemic accelerated the adoption of e-commerce shopping and digital marketing channels. Whilst simultaneously privacy and identity regulation and technology changes such as Apple's Internet Tracking Prevention and the forthcoming Google privacy sandbox make it more important than ever that large brands have control of their data and the ability to seamlessly utilize it for advertising and marketing. AI is arguably the trend of the year and for brands to be able to effectively leverage this new opportunity and mitigate risks of data leakage they need to have their data organized in such a way that AI can seamlessly be used to solve challenges and unlock value ever more seamlessly.

For all these reasons and more it is clear that the CDP has never had more strategic importance.

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